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Squawk on the Street

News/Business. Melissa Lee, Carl Quintanilla, David Faber. Opening bell market action. New.

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03:00:00

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San Francisco, CA, USA

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Virtual Ch. 58 (CNBC)

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mpeg2video

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ac3

PIXEL WIDTH
528

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480

TOPIC FREQUENCY

Greece 46, China 25, Us 21, Apple 19, Alcoa 16, Athens 14, S&p 14, Simon 11, Spain 10, Angela Merkle 9, Carl 9, Imf 8, Merkel 8, California 8, Schwab 7, Goldman 6, U.s. 6, Geico 6, America 6, Citi 5,
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  CNBC    Squawk on the Street    News/Business. Melissa Lee, Carl Quintanilla,  
   David Faber. Opening bell market action. New.  

    October 9, 2012
    9:00 - 11:59am EDT  

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leaving school and not be able to read or write, it is heartbreaking to see what happens. but i'll say it again, i think the american people are going to rise to the occasion and more importantly our kids are going to be saved. >> ken, thank you for being here. make sure you join us tomorrow. "squawk on the street" begins retired now. five years ago today the dow and the s&p 500 hit the all-time high. gwen stefani was on the radio and apple was $167. good morning, happy anniversary. i'm carl quintanilla. interesting morning setting up, futures modestly higher here after shanghai does rebound to a one-month high. the chinese central bank adding liquidity to money markets over there. in europe, meantime, merkle arrived in athens along with massive security personnel.
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we have seen some protesters stream into the area. we'll get live pictures in a moment. the road map starts with markets. about 6% off the highs since five years ago. can earnings season send stocks back to that level? german chancellor angela merkle met with protesters in greece to talk about the downgrade of global growth, specifically forecasting a contraction in the eurozone. the netflix run may be over after a torrent gain in a single week. b of a says they underperform. they tell investors to take the money and run. apple is losing its shine. down 9% now since the launch of the iphone 5. today is the fifth anniversary of the dow and the s&p hitting all-time highs. the dow is 581 points short of the record, 14,164.53. the s&p is 109 points from the
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all-time high of 1465. earnings season gets the season kicked off today with alcoa. a global labor report because it does matter when you're looking at what the economy is going to do. >> one of the things alcoa has been able to do, particularly with the ceo, is take aluminum and replace a lot of other different metals, whether it be steel in cars because it's much lighter and therefore you use less gasoline. airplanes because again it produces the gasoline use. by the way, it does construct electricity, maybe not as sufficiently in copper but it is used in china. when you look at a can, you know it is recycled over and over again. the skin of an apple ipad, i mean, aluminum has become the fundament. aluminum has been hit by football hedge funds and we have
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chinese people producing huge amounts of aluminum. if they would close that and let alcoa come in, then you would see a much better number from alcoa. i'm urning people not to look at the earnings per share. that is not going to be -- what you need to do when look at alcoa is look at the individual forecast that he makes. when you see him as a man of his word, this is the barometer i look at not set up by a particular group of people other than a major company. >> the eps oftentimes mired with one-time closure because of capacity intakes and so on is confusing. the conference call will be what matters, what they say about demand in the auto service, for instance. oftentimes after the recession you see the stocks move off the back of what alcoa says. you see the moves in gm and boeing. that's what we are watching this afternoon, not necessarily do they beat on eps and revenue but what they say about the end
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consumers. >> i can tell you as i've been involved in trying to monitor alcoa over the years and a series of let me just say mediocre ceos until clauscame in from the soviet block and has spent more time on doing an honest conference call in his divisions than anyone i have met. it is a well-orchestrated play. it is really one of those dynamic -- it lives in art and text and just checks off every single major industry in the world. >> how important is china to alcoa? >> very important. they are producing 5 million tons in excess of what they need. a lot of china, particularly in alcoa, and aluminum, is about putting people to work. you can't shut those factories without throwing them out on the street, a lot of china laborers.
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but you can only imagine how horrible the air is around a smelter that is not set up to be able to contain pollution. >> i would just be curious because exports to china from so many other countries in the region are down. exports of all sorts of raw material that is china uses then to manufacture the goods sent around the world are down sharply. i'd be curious to see if we get any sort of a decent sense as what's going on there. >> krause's people did correct me when i said the chinese dump a lot. they dump a lot of products but they are consuming the aluminum, but it is high-cost aluminum and they are not being rational in part because china has a labor employment problem, hence why they are injecting another $40 billion there. china is not like the jets, a season on the brinks. >> i think it is over now. the bring was crossed. >> true. but the chinese are doing
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everything they can to keep people to work, and that is going to hurt alcoa's earnings. melissa points out correctly one time, don't forget, you'll see something about the australian dollar and how the australian dollar has hurt it. don't look at the earnings. they are a false tale. look at the individual growth rates that klause projects and you will be able to make a lot of projections how the quarter is going to do. >> is history a false tale? you freaked me out a bit with the five-year anniversary. '07 of october, i remember it well. we were already in the midst of the credit crisis. we had already seen residential-backed mortgages going down. the bear stearns fund already had the issues in july. and yet we were at highs in the s&p and dow. what was it, five months later bear stearns would be gone? a year and a half later we were sitting with a six in front of the dow. what am i missing? >> and what's truly frightening is october 9 is not only that
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anniversary but the anniversary of the beginning of the bull market back in 2002 when the dow made an interday low from '02 to '07. both instances centered on october 9. >> back to 1987 on october 9 it looked to have a great close to the end of the year. dow was selling at 29 times earnings but it looked like because of the way tokyo was, they were passing our market in terms of market capitalization. they were coming in to buy our stocks every morning. you come in at 9:30, you would buy stocks at 3.30 and sell them to the japanese at 9.30. it was like newman. >> mitsubishi, matsui, all of them. >> then you get the call at 4:00 from the brokers saying, tonight we are taking up some tokyo railroad. today we are taking up tokyo electron. you just bought 100 million.
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i don't know, that's like illegal. well, that's how you do it in japan. wow. >> we are going to look back on alcoa and should have seen that. we should have been more focused on that. >> your stocks are so high and you think we could have been in the precedence of something, is that the parallel? >> i think looking back at '07 i was focused on what was already a credit crisis, it was obvious i think to many people that the equity markets were going to suffer as a result. but it wasn't obvious to most of the market participants because we were hitting all-time highs. what are the things we are not fully appreciating right now, if there are any, as we approach all-time highs. >> look at the makeup of the all-time high. do you remember what group led us in 2002? fertilizers! we were led by mosaic and talk about narrow. caterpillar up every day. >> ge was $40 a share, too. >> apple is trading at 14 times
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the earnings. >> the biggest gainer since that day, priceline up 580% from this day five years ago. >> a little trivia, alcoa, where was that during that period? in the 40s. >> wow. >> people were getting the apple iphone. i'm doing a super freaky analysis. >> you're a super freak. >> remember rick james? it was a rick james kind of market. now it is from netflix a steve miller market. some people call me maurice, but this downgrade by bank of america -- >> i was doing the sound effects for maurice. >> i like that curious chainsaw you were doing. >> whatever i can do here. >> my wingman. >> your solid gold dancer. let's move on here to talk europe. german chancellor angela merkle visiting greece today for the first time since the european crisis began. she's meeting with greek prime minister this morning as
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protesters blame merkle for forcing painful cuts on greece in exchange for bailouts. meantime the imf is cutting the global forecast to 3.3% down from 3.5% and urging u.s. and european policymakers to deal with their fiscal issues or face a prolonged downturn. the imf is forecasting a contraction that underscores what we do already know and should be expecting out of the region. >> we are taking back one of the two rate hikes they had. there's not a single policy going on here. look what ireland was doing cramming down their banks. but if you can see, david, is there a single pro-growth initiative in europe that you have seen? >> no. >> isn't that incredible? they are still worried about carbon taxes. they have to take the carpet tax up before the carbon tax. >> i gotcha.
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>> the carpet tax. >> animal crackers? >> no, no. >> duck soup? oh, man, is that terrible. >> part of the imf forecast, jim, bringing the numbers down for the global economy has been austerity does not work. >> it doesn't work. but that's paul crudeman who says it. i pet you paul crudeman believes in the 7.8 number, the big phony number. i bet you crudeman believes in it. how is that the focus of the discourse? i'm trying to make it alcoa. look, the imf is saying the obvious. the world bank is saying the obvious. if you continue to call for austerity you can't get growth. it's like, look, you want growth or want austerity. lyndon johnson, guns and butter equals inflation. if you just -- they are not doing guns or butter. if they are not doing margarine,
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they aren't doing machine guns. >> then you start again but they can't do that. >> we are devalued better than they are devalued. >> you would think we would be but the dollar is much stronger given anticipation of where rates are. >> true enough. stock specific stuff this morning is the netflix run over? shares of the online video service down in the market after b of a undergrades it to underperform from a bay. from the beginning of the month netflix has jumped 30%. b of a goes a couple times out of radio shack and netflix a double upgrade or downgrade skipping the neutral range. >> radio shack took that up with a $2 price target. >> reporte >> 2.50. >> someone must have gone and bought a couple 16-foot connectors. i think that, by the way, herb greenberg had an excellent point
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on cnbc.com where he's quoting netflix peaking, and also questioning the hbo strategy. look, if they had, frankly, if they had homeland, netflix would be going through the roof. the most talked about cable show that i have seen since "the sopranos. ". >> i watched episode two last night. good ending. >> i have only seen the spoiler. >> i didn't say anything. >> what are you doing talking about unemployment? talk about something real. don't you dare give away the end for those who have not seen it. >> i didn't. >> just so we are clear on that. >> b of a, the title of the report is take the money and run. $72 target. they are valuing the domestic streaming business, jim, at 20 times. the domestic dvd business at six times. they say international, which is the company's big claim to growth, has a lot more risk involved. >> i think that amazon is the way you watch things these days. the amazon stock is just on
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fire. netflix, this is one of those stocks kind of like green mountain where it is at 40 and then at 20. there's a lot of short in netflix. and if this number comes out bad, those shorts will do what i have seen in green mountain coffee, create stock and drive it down to freak people out. this netflix is a true battleground with the feeling of them coming over the top, 60,000 people die in the first three hours, i don't want to touch this thing. this netflix is sizzling. >> yesterday you said it is too late to short it. >> i can't short it and can't long it. it is too crazed. >> 28% of the shares outstanding are short. 28% still. i mean, it's an amazing press. >> this is one maybe you do an option strategy if you want to play it. i don't know. what are you guys saying the options are about this? is there a way to put it home? >> there's probably a putt spread out there you can do. >> we'll talk to herb at 1:00
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a.m. about this issue. >> herb is out there. you talk about the chenis rule. >> regardless, it has an incredible impact on the ecosystem of the way we deliver content. and whether netflix is a name we long forget, it will still always have that. >> what does that tell you about netflix? >> netflix is a help to all the content help. cbs could make its quarter, not that they would do this, but just jamming stuff to netflix under their programming deal. you have to buy this, you have to buy that. great deals they have signed for cbs with netflix. >> most content providers say at the end of the day they are diagnostic, but when i was talking to michael burns, they have a great partnership with netflix but he did say a better deal came along -- they don't have a loyalty there. there's no loyalty to netflix. it's a delivery system. >> it voted to keep ramping up its streaming subscribers and if one falls then they are in
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divulge. >> are they going up every year? >> i believe so, yes. >> so people gave away things to netflix initially and now they found out -- >> they can charge more for it but netflix needs to add more programming to make the services as robust to against the likes of amazon, which is it is doing more effectively with more stuff there than you want. >> i went to the premier held by netflix and that was the one episode i saw, even though i have netflix streaming. >> the boost of the great product netflix brings, it's a great product. >> i'm not fighting the products. there's a lot of products i like that i would never buy a share of. >> that's very true. >> go to radio shack every day. >> i was at radio shack two weeks ago. i was. i needed a 30-foot cable because best buy didn't have a 30-foot cable.
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radio shack had a 30-foot cable. >> that's why you go there, for the connectors. >> they wanted to know what i was going to do with it. well, i'm going to hang myself with it. i'm going to make it so one tv can reach to the jack. what are you going to do with that? are they afraid? some sort of a good samaritan thing? what are you going to do with it? when we come back, playing the new game of risk. also ahead, can china no longer afford to be a bully? we'll examine the struggle to maintain its dominance in the world's economy. take one look at futures this morning riding the flatline today. much more "squawk on the street" as we are back in a moment. up your game. up the ante. and if you stumble, you get back up. up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything
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♪ germany's angela merkle visiting greece for the first time since europe's debt crisis hit the fan. we are seeing how welcoming the protesters are towards her stay there, not very. what a souvenir t-shirt would read that describes merkle's description. i went to greece and all i got was this blank. we'll hair your responses throughout the morning. hopefully all the responses will be clean. >> promissory note, jim.
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>> anything is better looking than that green smock she had. >> what do you wear to a press conference like that? >> prada or something. >> support italy. >> just go to nordstrum's. she could go to daffy's if it wasn't closed. they have tjx over there. >> she dresses nice and gets slaughtered by the public media. you don't want to dress up before a country -- >> she's going to a euro store which is equivalent of the dollar store. honestly, i can tweet that myself. >> i think green is a good color on angela. just my two cents. all right. last night on "mad money" you revealed the first of the ten hottest momentum stocks anointed by wall street. find out what has him on a role this morning. kramer's mad dash is next. also, food for thought after
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a number of preannouncements and downgrades have restaurant stocks become an earning season value play. we'll dig into that. we'll look at futures this morning. and a mixed bag here at the s&p looking to eke out a gain on this five-year anniversary of the markets closing highs. much more straight ahead on "squawk on the street. " yy tridion safety cell which can withstand over three and a half tons. small in size. big on safety. five days later, i had a massive heart attack. bayer aspirin was the first thing the emts gave me. now, i'm on a bayer aspirin regimen. [ male announcer ] be sure to talk to your doctor before you begin an aspirin regimen. [ woman ] learn from my story. tdd#: 1-800-345-2550 tdd#: 1-800-345-2550 and the streetsmart edge trading platform from charles schwab... tdd#: 1-800-345-2550 gives me tools that help me find opportunities more easily. tdd#: 1-800-345-2550 i can even access it from the cloud and trade on any computer.
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stanley black & decker trade then these guys came out and say roofing composite not doing well. really hard to mount a housing trade today when the pink panther ain't selling as well. this is the roofing part, actually. >> things were going okay until they raised prices in the middle of september. >> interesting, isn't it? once again, you try to figure out how strong housing is, is owens-corning specific to owens-corning, the company is not executed well but this is a big decline. i don't know if i want to get in front of it even though they say asphalt pricing is okay. i think this colors us much more than people realize versus a spectrum brand. spectrum brand buys the quick set division. i remember when they bought that. it's a mixed picture. i don't want to give up on housing, it's too strong, but i would say owens-corning says maybe not today, stay away from sherwin williams. that's one of the hottest stocks in the market. >> one of the arguments in home
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builders has been the fact that they are facing higher costs. and clearly this is pushback on that. >> i think so. look, they said they would raise the prices of their houses somewhat. fantastic article once again in "u talking about how housing, some of the areas have gone past peak pricing. and it tends to be if you look at the fine print where oil is, because that's what is buoyant. the west texas interimmediate differential, the highest ever. that's refinery caught up in that, but owens-corning is going to color today's trading because it was a great place to hide and suddenly they found you. >> they are making fewer and fewer of those. we'll talk about apple later. in the meantime, apple previously crisp and getting mushy in spots are. you better off making a pie? and fallout from the global slowdown. does it mean china's bullying days are coming to an end? and the game of risk, are banks doing a good job of winning it? get ready for the opening bell. we are back in a moment.
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and look at that date on the calendar, october 9th, five years since the dow and s&p hit all-time highs. there on the big board this morning, what a week it has been. the susan g. komen for the cure organization marking national breast cancer awareness month. before we talk stocks, i want to show you a live picture of athens this morning. tens of thousands of demonstrators are there voicing their displeasure with the arrival of angela merkle. there's also a ban on protesters there right now, but obviously demonstrators are defying the ban. greek police fired tear gas and stun grenades at the protesters and they tried to break through a barrier and reach where merkle is meeting with the prime minister several hundred meters
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from there. they have thrown rocks, bottles and sticks at police. we'll see if this will continue to get more violent throughout the day today. >> market reaction over there has been very muted. the markets are barely moving, less than a percent across the board over the europe. as for the euro/u.s. dollar, that's hovering at 129.13 there. this is a story we continue to watch. apple is one stock we are watching as well. below the 50-day moving average, it is slightly lower today. i want to basically say unchanged at this point. but we had chris with us on ""fast money"," a technical strategist, who said he would prefer to put his money into or recommend investors put their money into google as opposed to apple because google is showing signs of momentum. this is a pause in apple's upward trend but still the momentum has been on google's side. he'd rather be in a stock that has shown little movement with a big push upward over apple with
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momentum over the last couple years. >> i made the call that google was better placed in a trade rather than a moment of invest. i was quoted on twitter as if i was a turn code, but i was just making a point that apple is a good investment but it's not going to do much. and that google could have a real run. i didn't know, when i see that kind of victory, when you see something about a stock, it always makes me nervous because stocks in the end are pieces of paper. i like apple, i think it should be owned, but google has the momentum. >> yeah. talk about momentum, take a look at shares of eli lilly up from goldman sachs getting a fresh 52-week high upgrading to a neutral with a $52 price target up from $42. the skepticism goldman writes was proven wrong. specifically there was a new study with new results on alzheimer's drugs that show 42% improvement in memory loss. slowing of memory loss, i should be more specific about that, in
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patients with a mild form of alzheimers. so certainly a bright spot there. >> goldman seems to, frankly, they handed lily all the way up. they obviously didn't believe in the alzheimer drug. now they hate j&j just when they are in a position to bring up value. look, not all analysis created equal. i thought this analysis was weak. and i think that when you miss that eli lilly move, which to me was plain in the face to have any positive minimum. it was almost like they don't realize alzheimer's is horrible. anything that lowers the chance of alzheimer's early on is just incredibly good. so now they join the party with a hold and have to take something off jnj. this group has been terrific. you have to rethink your game plan, goldman. you have to take a look at that. >> we got this data wrong and were skeptics on the way. they do say we are going to a
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neutral on lily and expect them to go through phase three for an extended period of time. so it is not like the world is changing in a heartbeat, but a bit of a fall in your call today. >> that was the reason why we don't mention the analyst there, the humility is pretty clear-cut. i wish the jny had not been done because jnj is in a situation where the balance sheet is fabulous, they have a lot of different things the company can do. the new ceo. a lot of times people at home don't understand there's research there where if i take up something i have to downgrade something. to me this is counter intuitive. if this company makes the playoffs and this company doesn't, i like this one better. this is not football. one is a hold, one is a sell now. i don't know. this group has been very good. a great place to be. >> interesting david, we talked a lot about china yesterday. this morning, cisco reportedly halting a partnership with zte, one of the two companies named in the house intelligent report over alleged sales of equipment
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to iran. that story is going to have some legs here. >> it will. of course, cisco has clashed in the past with wawe about the electrical property and things of that in nature. but this story has legs and we'll see where it leads. the relationship with china is complicated, so complex on many different levels, but this is adding another layer of complexity to that. and melissa brought this up yesterday, will there be a response from the chinese? could it prevent those companies here from selling equipment there in doing so? hard to say where this ends up, but it's going to keep going. >> the lead story in "the journal" was a big china bash. a trade war is not good for business, in general. >> i wonder if this isn't going to be the next fulcrum of the next debate. >> i doubt it will be. rogers, we had him on yesterday, he's trying to raise the alarm
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bells in general about corporate cyber espionage, chinese cyber espionage. this was an effective way to do it. more so than he's done in the past. meanwhile, we still haven't got a bill out of congress to address the concerns, even though there's been bipartisan cooperation. one of the few areas we have actually seen it in trying to grab something. >> is there a china law in this country? a china lobby saying stay away from them because we need them so badly? >> i don't know. >> a lot of companies need to sell to china. the last thing they want to do, i don't think they want to hear about a trade war, given they own so many kentucky fried chickens in china. >> there's a trillion dollars in treasury bonds pretty strong lobbying. >> that's true. that's true. >> i think you're right. the main thing about china is it is more complicated that it seems. >> finally, a couple interesting notes on banks, david, the
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makenzie report saying the business model will provide sustainable profits and there's a poll of bankser who believe their numbers will get better, not worse. >> optimism never dies when it comes to people's pay. you look around them to see everything falling down but i was a star. i served to get paid well. we talked a lot about it. i think when you talk to the executives who run many of the global institutions, it is coming down in a true way. it's a seminole change in terms of ways they pay people. better that you get paid off than laid off. unless you are an extraordinary banker and there are a few of them. everybody out there thinks they are one of them, but there's a few. we are watching this closely, but the model is in flux. we have talked about that many times. what is the true thing for these institutions, can they be global players and maintain franchises even though it costs so much to do so when the volume is so low?
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>> goldman sachs' article in the paper today about them giving a lot to romney, can that lead to a thought that perhaps you get less dodd-frank and therefore pay goes up? >> if romney becomes president, what does he say about repealing dodd-frank, parts of it if not all of it? the affordable care act goes away. dodd-frank is well, provisions of it. no doubt the perception is he would be easier on it. >> basically dued in the new pew poll. things have changed. >> i wonder if this elizabeth warren race up in massachusetts is going to play a role. you get elizabeth warren in the senate if she wins, she's obviously the most deidentify house voice against banks. maybe this will continue. obama, warren and then banks just become in a continually bad place to get a job. >> regulation of the banks is in
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interpretation because of dodd-frank. much of it has passed. they are adjusting to new realities. in terms of capital requirements, holding a lot more capital against businesses and transparency, things like derivatives exchanges hit to their profitable. >> you have all the institutions suing each other about the mortgage-backed bonds, it is just one group of institutional investors suing another group of institutional investors, the court is not set up to handle it. no one knows what to do. i think there's going to be billions of dollars in legal fees. that's the only winner. >> we have to check in with bob on the floor with more on what's moving this morning. hey, bob. >> good morning, everybody. happy tuesday. did you see, of course, christina la guard this morning cutting the global forecast for the imf? and that's not good, the second time this year, but the segway is an argument we have been having here the last few days at cnbc. and that is how can the stock
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market be near 4.5-year highs when people are cutting the global forecasts? that doesn't jive with what we normally agree the stock market should be doing. and, of course, the central bank interventions have been the primary aspect of what's been holding the market up. but there's also an argument that you can be making and that's being made by some about multiple expansion. remember, the stock market doesn't just trade on earnings, it trades on a multiple of earnings. if we are at 14 times earnings right now and things calm down in europe, some are arguing we should trade at a higher multiple. maybe 15? if you trade at a 15 multiple, maybe you can get to 15.50 on the s&p 500. so that is a real factor in what's going on here. the bears are arguing that europe is not going to calm down. even if the vix is at 14, eventually europe is going to blow up. that's the crux of the argument. but right now you can see the calming effect that europe is having on the stock market right now. let me move on. did you notice christine laguard sounding by bernanke making a
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point in the report that governments need to act to fix the economies. if we don't get the improvement there, we are in trouble. let me move on to talk about owens-corning, i have been covering this 20 years. i'm the son of a home builder and we bought a lot of fiberglass insulation from owens-corning over the years. it's a tricky company to cover because it is only partly tied to new home sales. they have this fabulous fiberglass insulation division that everybody sees when new houses go up in between the beams they put up. that's a big part of their business tied to new home sales but the other parts aren't tied to new home sales. so the roofing division, for example, yes, they can put new homes with roofs on them, but the big money there is replacement roofing. and in replacement roofing they have a fabulous 2011 because there were a lot of storms around the country. so business shot right up. so the margins or rather the comparisons to a 2011 don't look that good because the storms haven't been that great. they have another problem, they raised the prices with a lot of
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resistance. jim, you mentioned that. a third of the sales are outside the united states right now. can up da, asia and europe and those sales haven't been as good. so be careful about saying this means housing is slowing down. the insulation business is doing very well. finally, three entities cut their growth estimates on china today. jpmorgan, the imf and rio tinto as well two. around 8%, the imf at 7.8%. again, remember, guys, three or four months ago what side of 8% were you on on china, a number of them lowered the numbers today. guys, back to you. >> thank you for the owens-corning. i think that's confusing people and you straightened it out. great call. the bond market is back in action after the columbus day holiday. rick santelli is live at the chicago exchange. hi, rick. >> hi, jim. psyched to be back. 66 billion in supply this week starting today with threes. so today near 1:00 p.m. eastern they close attention.
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our trends are down several basis points. if you look at the boons, they are up several but remember the fact that the bond market was closed yesterday, it is still apples to a apples. net change from friday the way i'm doing for our tenure, it's also down several basis points very similar. we all know that this morning the images from greece, nigel on "squawk box," i urge you all to go back, he tells it like he sees it. many of the issues brought up on the weakness of europe and the reforms when you really dig under the surface are part of the reason the euro is getting tagged today. and the euro gets tagged, the reverse image of the dollar index doing better but another issue also obviously thinly traded but as you look at the intertrade of tenures in spain, they are up ten basis points. back to you. let's go to sharon now. >> jim, why are we talking about syria and turkey when they are not major oil producers?
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because of the key transportation routes from northern iraq through these countries and the possibility that the tensions we are seeing between syria and turkey that are the highest we have seen since march could definitely impact the transportation of oil to the west. that is the big concern and that is part of the reason why we are looking at oil prices up over a dollar. we are also noticing this big spread, a record spread between brent and wti futures trading some of the momentum, particularly in the brent contract now above $113 a barrel. but some in the industry say oil prices right now are still at a comfortable level for global growth. it would be better to be close to $100 a barrel but he's okay with them at these prices. copper prices are off their highs. rio tinto talking about china's forecast and reducing that somewhat. china is one of the biggest producers in the world of
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copper. the biggest producer, 40% of the consumers of copper in that country as well. so this is a big deal for copper. we'll keep our eye on it. back to you. thank you, sharon epperson. crashing the house party, find out what it takes for democrats to win power or for republicans to hold control. but first, protests welcoming germany's angela merkle to greece in her first visit since europe's crisis began. tell us what a souvenir t-shirt says, i went to greece and all i got was this blank. tweet us. we have the answers coming up. as we head to break, take a look at this morning's early movers on wall street. ♪
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take a look at a live shot from athens. it looks relatively peaceful on the inside of the meeting but outside there's a lot of protests and demonstrators trying to get into or near that area. tens of thousands we are told on the streets of athens.
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that brings us to the "squawk on the street" question. this morning we are asking you, what a souvenir t-shirt would read like that describes merkle's visit? by completing the following sentence, i went to greece and all i got was this blank? a lot of responses, scott wrote and all i got was this expired bond coupon. you saw this coming. vi writes, all i got was this collection of drachmas. and @kramershirt says, all i got was this molotov cocktail. what's more concerning is the inconsistency that the troika has. they cannot make up their minds. >> i was watching this morning and he gave a great talk like bernanke with common sense. you just keep thinking, our guy
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makes a lot of sense, let's just go with him. but no, draghi is kind of ignored over there. he's very smart. >> greece has 8 million people. it's already defaulted. if you have already suffered, let's focus on spain. >> spain says tim cook could write a $60 billion check. that's what they need. maybe it would make up for the maps problem. >> maybe it would. >> let's check for spain. get rid of the world crisis. >> what do you get if you write a $60 billion check as collateral? what do you get? >> it would turn around our view of apple. suddenly maybe that's how he would get away with the problem of the 50-day moving average. solve the technical problem by writing the $60 billion check. everybody goes home happily and apple reverses itself. >> i see. >> i think the shareholders could be a little distressed but you never know. >> what would they snow in. >> maybe that's a good return on the $60 billion.
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>> that's a huge wire transfer, i'll tell you that. >> he's making nothing on that return. he gives them $60 billion. he makes 7%. maybe get a hedge at 2%. next thing you know, i'm taking numbers up at apple. breaks the 50-day moving average to get the stock going. stranger things have happened, david. >> we'll have a lot to talk about that morning. it would be very interesting, yeah. >> then the ipad will come out and he has to write a check to portugal to get thing going. how many countries can cook bailout? >> verizon and at&t write the checks to him. i think that's the better business model. >> you mentioned the 50-day, the comp below the 50-day moving average for the first time since late july. apple is almost 20% of that index. when we come back, hungry for clarity on how to play food stocks ahead of earnings? we'll put the green in green market. but up next --
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simon is raring to go after a business trip. >> we'll return to the program with extraordinary numbers out of greece. the nation says she is destroying the latest with angela merkle there in athens. we'll talk about apple and also ask whether wall street has any longer a credible statesman to represent it on capitol hill. back to you guys. >> we'll see you in a few moments. six stocks in 60 seconds. we'll begin with itw, a downgrade. >> this is a part where i see where we are going into earnings. we recommend the stocks and hope they come down again.
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sell intel. >> this thing is so hated, you think that they have no yield in a bad balance sheet. >> downgrade of diamond offshore. >> look, i find this questionable with oil. it just is stubbornly high. it is not down. >> research in motion. jeffrey says the ten might be delayed here. >> i thought this was interesting because becky quick got this out of the ceo. now suddenly it becomes common parliament? just watch "squawk." >> raising the price on marathon. >> they stole this from bp. bp has become a source of all things good from everybody because of the spill. >> and morgan stanley says time to buy. >> i find this as a shocker. the restructure in europe is going to take hold. wait and see. i don't go for that. for more on the teams, what's on tonight? >> one of my favorite ceos in the world. gary rotkin, part of the go
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healthy week. this guy is one of my hear rows. he took a company and is making it great with a good yield. look, some guys are just good. that must be a check, so this doesn't work, but conning a ra, rodkin, this guy is money. he's money. >> our go healthy week, did you have a tip to stay healthy? >> when i stay healthy, i have the exact same salad every day for lunch for the last seven years. protein, just don't put anything else in it. >> stay hydrated, too. get lots of sleep. >> see you tonight at 6:00 and 11:00 eastern time. when we come back, we are entering the weakest earnings season since 2009 but we are here to help you get through it. a big picture preview straight ahead. and the latest from greece as german chancellor angela merkle is there in times square. we'll give you the latest on that in a moment. bob... oh, hey alex. just picking up some, brochures, posters copies of my acceptance speech. great! it's always good to have a backup plan,
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up isn't easy, and we ought to know. we're in the business of up. everyday delta flies a quarter of million people while investing billions improving everything from booking to baggage claim. we're raising the bar on flying and tomorrow we will up it yet again. here's the rundown for the next hour of "squawk on the street." angela merkle arriving in greece today with a short visit in six hours as protests abound in
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athens and the imf is downgrading its global forecast earnings. contraction in the eurozone as a further debt writedown is now inevitable? >> and from the eurozone to the tech world, apple is seeing the pull-back since the launch of the iphone 5. they see little scope for the upside. is it just for fundamentals? and real life and big money that could be at stake by big banks and how tougher regulations, though making the financials stronger, could have also made them weaker investments. first, back to the debt picture in greece. german chance lor angela merkle landing in greece a short while ago with a short six-hour visit in the greek capital being met by thousands of protesters. a swelling german anti-sentiment is growing in the city. we'll bring in carolyn roth joining us live from athens with
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the latest. talk about putting daniel in the lion's den. >> oh, yeah, the violence has flared up again over the last two or three hours. ms. merkle is a figure of hate for many greeks here who blame her for the many rounds of spending cuts. and you can hear it out there, the crowd is just gathering towards the center of the square. there's a lot of chanting, stone grenades being fired off, and you can smell tear gas everywhere. the protesters have hurled stones and water bottles at the police. and they have reacted by firing the tear gas. now they are trying to disperse the crowd here. i want to say for the most part up until maybe an hour ago the protests were fairly peaceful. we saw a clash and small skirmish on the outside fringes of the square, but again the violence has definitely picked up in just over the last 60
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minutes. i just want to remind you that the two leaders held a press conference inside about a half hour ago. and ms. merkle once again addressed her support for the debt-stricken country and said, i want greece to stay in the eurozone. back over to you. >> on the one hand, she's saying that but, carolyn, equally important for germans she's saying there will be no more money. that, too, is crucial alongside the solidarity. >> yes, you're absolutely right. she came here as saying they are not going to have any gifts for the greek economy for the greek government. we are making no more concessions. you shouldn't forget that ms. merkle is gearing up for a new round of elections. so she can't go back to her electorate and ask for more money for greece. so her only hope is for greece to carry through with the reforms and for greece to
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actually be able to exit this crisis. simon? >> the finance by the german taxpayers, we should make that clear, carolyn, we are seeing the pictures there as police continue to move protesters back. can you give us an idea how far away angela merkel is from where you are at the moment and the types of red lines of security forces and the no-go areas in order to keep merkel and samara safe. >> reporter: well, merkel and some of us are a half month away from here. it is walking distance but they are in safety here. and i do want to point out that the police, yes, they have put in this red zone, this no-go zone, but again the two major unions, the public and private sector unions already had rallies approved before this red zone was actually implemented. so they were able to come into the square, into this red zone and protest.
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and it will probably follow other protesters. so it is very hard to control who is actually being let into this red zone. simon? >> carolyn, thank you very much. stay safe. carolyn roth there live from athens. i want to get more color on what's happening across the pond. joining us this morning, dan greenhouse, the chief global strategist and a cnbc contributor. and kevin corona is a portfolio manager. good morning to both of you. dan, simon is wriright, the pictures are alarming, but the story is more in spain and not in greece. the market is not moving terribly on those pictures. how important is it? how do you digest today? >> simon will be the first to tell you one of the reasons we are not sort of moving on protests in greece is because protests in greece are pretty much a way of life. i'm sure simon would agree. spain is larger but i would however note that greece remains a flash point, so to speak. if and when they decide, we
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still believe to be the base case, when they decide to leave the eurozone, it will be a problem no matter how small the country is. >> kevin, i guess one element toward that chapter will be getting some consolidation of thought among the troika, right? does it matter what the imf says whether they agree with other points of the troika? >> is that for me. >> yeah, kevin. >> i'm sorry. i didn't hear. more in terms of providing a watchdog for the overall process. ultimately the money has to come from individual countries and really when it comes down to brass tax, there's going to be a bill to be put up here. even the yoeuropean stability mechanism is there. as we move closer to the date where greece needs to actually receive more funding, it's going to be pressured to put up the
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money and firm commitments will arise. on one hand, having the imf clarify its statement, having the finance ministers there meeting these two days, that's laying groundwork, but ultimately when push comes to shove, somebody has to write a check. >> and i want to push back down on what you said, what you were asserting in your answer just now, that greece will leave the eurozone. i called around europe this morning and that was not what i was being told. we should remember we have had a huge rally in the greek stock market during the curse of the last month or so. a massive rally on the view that we see from angela merkle they are no longer intent on quicking greece out of the eurozone because it's a bear hug, they will keep the greeks in and might perhaps reschedule some of the payments down, but the view is they are staying in the euro. >> you still have to find a way to get the debt ratio down from
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160/170% of gdp to something more manageable. nobody has a good answer on that, particularly with an economy contracting at 6% a year. i understand the idea but don't understand practically how you get there. >> and let me add, the math isn't there. i mean, listen, simon, i agree clearly the overwhelming likelihood from european policymakers' standpoint is to keep greece in there. at the end of the day, most of the outstanding debt is held by official creditors and a haircut is obviously not in the cards from their standpoint. my point to echo what kevin said is the math just doesn't support the idea that they can in any way pay this back. the way they are implementing austerity is foolish and as you can see from the pictures, they are causing riots in the streets. listen, i wouldn't bet my house on the fact that greece is leaving the eurozone, but i certainly think as this continues at some point the greeks are going to look around and say, is this working?
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so far the answer is unquestionably no. >> kevin, if this does continue and gets worse, what is the net market effect? do you go long volatility here? is there a trade around this? >> well, i think the trade around this is going to be for somebody nimble enough to go short. our point of view on a little bit of a longer timeframe is fundamentals are stronger in the united states. our portfolios are tilted away from the united states because we think that the u.s. is fundamentally stronger. but ultimately this is becoming a feeted swamp. we are going from years now where they had the opportunity to come together to work this thing out and we are no closer, in case of greece, we are not, in my view you are not much closer than you were six months ago or nine months ago. >> let me interrupt for a quick second here and just say, they have made a lot of progress here. the economy is not imploding on itself because they are not doing anything.
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they are doing something, they are just going about it -- >> it is contracting at 6% a year with enormous employment. >> i don't disagree with that. my point is that in terms of sort of reorganizing their economy, they have gone somewhere. they have done something. the point is that this point, there should be a baton passing in terms of supply policies not working. and if you look at what's going on in the u.k., for instance, to rile simon up there, their fiscal austerity implementation is not having the desired results but it was david cameron or george osborne who say as long as we are not missing on the spending side of things, we are not going to worsen what we are doing. >> dan, you would agree there's a lot more low-hanging fruit in greece than the u.k.? >> of course. you don't want to let imprudent policies take hold. you want to avoid that in the first place because the electorate in any given country is perfectly happy to receive but is not quite so happy as we
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can see with having the same benefits taken away. >> i don't know, daniel, i keep coming back to the idea if they leave the eurozone, it's going to be potentially years down the road and we'll be prepared for it at that point. and by that point we'll have a lot more answers on whether or not the whole thing will stick together because we'll be dealing with more important issues like spain. >> david, i agree, i think where the nervousness in our forecast comes into play is that greece leaves the idea of the irreversibility of the euro is immediately obviously called into question. and the idea that this is a permanent project from which you cannot leave, it is the hotel california, thrown out the window. then you wonder clearly about portugal and ireland and so on and so forth. listen, i hope this works out. my only point is the way they are implementing austerity at this point is quite foolish. as you can see, they are worsening the picture not making it better. >> what they are doing by delaying the inevitable is that
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they are not allowing markets to work. there have been many cases where you have countries that had their own separately floating currencies. europe used to be that way. the euro can persist and may not persist with the same members. if it doesn't persist with the same members, at least you derive benefits of the balancing effect of having a currency to appreciate or depreciate. >> i have sat quiet for a long time and have to come in on this argument again about having the euro floating currency as the answer to everything. the u.k. has its own free-floating currency and it is engaged to qe equal to 25% of its gdp and still the country is economically on its knees. there's more to it than that. it's a more complicated situation. this is a country we are watching here basically propped up by loans from the european central bank, left, right and center. these are extraordinary times. to suggest if you just allow currency to float free you would be sorted out is nonsense, frankly. >> there's an argument that this
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shouldn't have been constructed this way in the first place. >> but it is what it is. we are there. >> in terms of going a separate way in terms of the currency issue. >> simon, before we go, at some point in this hour, can you get into the political understory here between the germans tape greeks? i don't think this is being talked about enough here. >> no, not really. but maybe tomorrow. >> we are going to talk to hassle next. >> request noted. >> good to talk to both of you. let's go back to mary at hq. >> we are taking a look at shares of edward, symbol sign ew, the company is saying it will miss third-quarter revenue for the reason of the new heart valve introduced and sales were less than expected. they are also blaming less
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government spending in europe on health care. also lack of reimbursements for medicare programs here in the united states. as you can see, it is down 18% at 86.60. back to you. >> wow, what a movement. thank you. can you take the pain on apple, down about 9% since the iphone 5 went on sale. is it about fundamentals or something else behind the tech darling's big fallback. also ahead, the game risk, no, it is not the handy board game, but big money is at stake with more regulation. find out how it can put the financial system in jeopardy.
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>> sure. at the end of the day we need to be conservative with respect to the production of new technologies. clearly, this is a new hardware refresh from an iphone standpoint and the iphone is 65% of their revenue or gross profits, that is, so i think that it makes more sense to take a conservative approach in the near term. we think apple will beat our numbers but probably mistreat expectations. but i think the stock continues to have legs. so i do think we'll get into the $700, but i think from a numbers standpoint, we'll be conservative in the near term to see how production ramps up. >> are you surprised by the suck of the momentum out of apple in just the past week and a half or so? >> i am. i spoke with the market technician this morning about this and he basically said it does look alarming but he would be more concerned if the volume accelerating to the upside. from my standpoint, apple is moving through the 50-day average over the past year. that's nothing new. the stock is still 3x to the performance of the s&p 500.
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and is up roughly 60%. fundamentals are moving in the right direction. this is one of the period where is we have a consolidation, if you will. >> you mentioned the fact that the iphone 5 is a completely new product with a lot of new components including the new display screen, which is causing some of the supply disruptions at this point. are you confident, though, that those units that are not sold in the calendar third quarter in the calendar fourth quarter will be pushed to the calendar fourth quarter and at the end of the day they will sell the same number of iphone 5s will be spread over a two-quarter period? or will it be down due to the likes of the samsung? >> i think it is hard for the android system to penetrate the ios market. i think apple will be a victim of its own success over time as they penetrate what i refer to as the ttp, the theoretical
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penetration. i think the streak gets too wrapped around the axle with respect to what is going to shift this quarter and that quarter. at the end of the day, demand is greater than supply, hands down. and the market opportunity is still there based upon our individual analysis of each 250 global carriers that apple sells its handset through. so i think the numbers are going to continue to migrate higher based off our financial model. so i think the demands are there and the margins are there. the apple stock will continue to work until that stops. we don't see that decelerate for another 18 months. >> i'm sure you've read the note this morning in which they initiate with a neutral. part of the argument, brian, is not that android suddenly takes over the world in some new way but they provide just enough competition to where iphone margins flatten out or begin to contract. is that -- how high is the bar for apple to start treading water? >> i think margins have peaked.
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if you go back six months ago, margins were 47% blended for the company. we are expecting 40% this quarter. in fact, i'm conservative at 37% for this december timeframe. if we go forward a year or two, i think we'll see apple's margins in the low 40s blended. i think apple, the iphone will still have kind of normalized margins in the low 50s with a nice carrier subsidy and about a 90% upsale of margin on the resell of man. i think that will not change in the next couple of years, which is within most people's investment horizon. >> near term supply constraints are the story, but again, part of the thesis is that it will bleed into fiscal q2. is this going to go on longer than we suspect? >> i refer to it as 180 days of enlightment. the first two quarters of the iphone launch is when demand is greater than supply and the numbers will be pretty big n our
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opinion. so i think if we can't meet demand for at least the next several months, i don't think that's going to drive a lot of defections to the samsung or the other android ecosystem. i think people want to migrate to the ios platform. i think they like the apple products from an industrial design standpoint. so i'm not too concerned about that. >> all right. brian, we'll leave it there. great to speak with you. brian marshall of isi. we have "fast money" tonight that initiated the neutral rating on apple. >> they suggest that the apple's ipod mini is just like pizza and sex. i'll have one of each, thank you. >> are you austin powers? >> yeah, baby. the headline caught your attention, didn't it? >> i don't see why it is like pizza or sex, but that's my
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interpretation on the two products. >> oh behave. we want to turn your attention to jerry sandusky. he was sentenced to 30 to 60 years in prison. he's made some comments over the past couple of days, still denying all the allegations of which he was convicted. if we get more headlines on mr. sandusky, we'll get them to you. earnings seasons kicking off this afternoon at alcoa. we'll tell you how this could set the tone for the rest of corporate america and the markets. plus, we'll talk about europe, the global economy and who the u.k. would like to see in the white house. don't go away. ♪ [ male announcer ] how do you turn an entrepreneur's dream... ♪
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all day today we are taking a deep dive into the potential outcomes for the house of representatives following the november election, specifically an overview of the house, how many races are close and what will it take for democrats to win and for republicans to hold on. it is hard to predict anything with the way the down ballots are changing. >> absolutely. we have seen the presidential rate topsy-turvy. the house democrats have been
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anxious to get control of the house of representatives, but this comes with a big caveat, they believe that is an uphill battle going into november's election. let me break it down by the numbers, you can see why that is such an uphill battle for the democrats. the current house makeup is 241 republicans, 194 democrats. you need 218 seats, that's the magic number for the majority in the house of representatives. that means the democrats, depending how you count the vacancies, democrats need 25 seats to pick up to control the house of representatives. 26 seats right now by political observers are considered toss-up races. not solidly republican or solidly democrat. of those, seven of the toss-ups are democratic seats. 16 are republican seats. even if the democrats were to pick up all 16 of those toss-up seats that are republicans now, they would still have a ways to go to get to the 25 to get over the 218 magic threshold. that would indicate to you that
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nancy pelosi will probably not get the gavel back from john boehner as speaker of the house, but the only poll they do is on election day. of course, at the presidential level, we have seen some of those polls moving in mitt romney's favor. but when you look at the house races, you have to bear in mind the presidential election is being fought in the ten battleground states, not really in all 50 states. so all of these brown ballot races are out there on their own and they are responded to their own forces, carl. >> thank you very much. can't wait until the next debate thursday night on cnbc. it's my first presidential election here. it's all new, shiny and bright. >> enjoy it while it lasts. >> thank you. ahead on the show, the new game of risk for banks. the rules have changed but for investors something totally different could be in the cards. and still to come, i'm taking a chance to go home. while the bully on the playground in the world economy
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♪ about an hour into trading, some of the stories we are squawking about. 7:31 on the west coast, 10:31 on wall street. shares of intel falling to 52-week lows. bernstein cutting the largest chip maker to underperform from
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market perform and lowering profit estimates on the dow component 2013. eli lilly up 4% after goldman upgrades the drug maker to neutral from sell. and shares of spectrum brands up 11%. the company known for remmington and other consumer brands is buying stanley black & decker's hardware for $1.4 million. the imf global economy risks skidding back into the recession three short years from emerging from the previous one, this is ahead of the earnings kickoff tonight. we are joined by our friend here, good to see you, and today is the five-year anniversary of the record high. people like to make comparisons where we are now. david in the first hour of "squawk on the street" said this is a little freaky because at that time we were hitting highs and we didn't know what was going to hit us in the months to come. and here we are sitting at our
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highs for this run-up and maybe we don't know what's going to hit us in the months to come. >> well, that's a function of the business, okay? if we knew exactly what was out there we'd come in, set the price in the morning and go swimming. you know, you've got to stand and pay attention, not only day by day, but minute by minute to see what's going on. this certainly is a good deal of less euphoria than back then. you must remember we were getting reassured even though housing was beginning to come apart, the fed was reassuring us there's never been a national real estate problem. >> subprime would be contained. >> that was some containment, wasn't it? >> and then we had ceos, chuck prince saying as long as the music is playing we aught to continue to dance. is that where we are now? >> no. i think people are cautious to a ninth degree. if you take a look at the balance sheets of corporations, they are holding.
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even though it's been basically four years through this, that shock of when lehman went under and then the commercial paper markets froze up, they don't ever want to be in a position where they need money and don't have it again. so they are sitting on it offshore, but people are certainly very cautious here. >> to investors, the general makes two important points today. because of the good morning and gloom, doom and gloom, they have 92 billion of 32-year debt. many are engaged in share buy-backs as a result. the other is that europe will stop growing next year and europe is the most important market for the international companies here on the s&p 500. it makes up almost half of their return, so actually now is the time to buy. >> i think that is a rather large assumption that europe will begin to grow next year.
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they certainly haven't gotten things straightened out. there's a feeling that the pinch that we have seen in europe is beginning to move into places like france, the new policies there are beginning to bump up against the wall and get changed. so i'm not quite so sure that so far god is in heaven and all is right in the world. we have a ways to go here. >> you look at apple, what does it tell you about the markets overall when you see low evaluation but a tremendous love, a well-loved stock in the market now down about 10% since the launch of the newest product, the iphone 5. does it tell you something bigger about the market or the attitude toward chasing performance in the fourth quart her? >> yeah, i think apple is a very specific case. i mean, a spectacular company, steve jobs' legacy, et cetera. but in its own way, it's a company that's one product away from failure, you know?
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if the iphone -- they get two-thirds the earnings from the iphone and it begins to get swamped by the droids and other things. that picture could change big. >> you know the counter argument is, i've made that before, and analysts come back to say it is not one product but the latest version of the ecosystem. and that if you're buying into all that is apple, you are going to buy the iphone 6. because you're there. >> well, in many cays people are hooked, because you see them standing in line for all these things. but that ecosystem like any ecosystem can change rather drastically. there's an old schoolchildren's riddle, what's worse than biting into an apple and finding a worm? that's biting into an apple and finding half a worm. you want to be sure you're not
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past that problem. >> you have more? that's good. >> so just getting back to apple just quickly, does that make you more cautious about the broader markets? we are talking about a pull-back today in apple that's greater than the broader markets on a day when the nasdaq 100 also breaks the 50-day moving average. there are implications from the broader market, people say we talk about apple way too much. we talk about apple because of the market implications. >> it does have great psychological implications. it has been the hero. you've seen money managers driven into apple because you said, i'll wait. well, you can't. it moved the market so dramatically it was a must-own. now if the must-owns are showing vulnerability, then the market can be impacted. >> that does raise the question i had, october 31st is year-end for a lot of funds. and this theory that we are going to be in a catch-up mode in fourth quarter is going to run up against a wall here pretty soon. >> it's running out of time
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rapidly. and you'll have to make some moves. they still can't get any kind of satisfaction in europe. the unknowns are there and the election is out there besides. and it would appear to be neck and neck. as you guys just ran a piece on, it could be said in both houses of congress. you don't know what the direction is and it is very difficult to make a decision then. >> art, thank you for your time. art tesch from ubs. sharon is here now with the latest. >> reporter: hey, carl. oil prices should be closer to $100 a barrel because we have a significant rally on our hands today with brent crude prices near $114 a barrel. nearly the highest price we have seen in about three weeks' time and driven higher by escalating tensions between syria and turkey. why is this so important? well, the key here is transportation moves. and specifically the iraq/turkey pipeline that takes oil from
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curcan. we are talking about southern export terminals with 2 million barrels we are day. this could have an impact here on the oil price. technically speaking we are above key technical levels in the brent crude market, though the wti market, interestingly enough, is just basically mired in the middle of a range it has been stuck in for the last several weeks between $88 and $92 a barrel. traders say this lets you know it is this geopolitical risk in the marketplace lifting the oil price more so than almost anything else. and certainly more so than anything fundmently to impact the domestic oil market. so we'll continue to watch prices here as we could potentially get to a new high of the month here today for brent crude oil. simon, back to you. thank you very much, sharon. in the meantime, let's just for a moment focus on what's happening this afternoon. it's the beginning of the earnings season with alcoa
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reporting. this is an important earnings season for them because earnings are so far forecast to be down. christine schult is here. how bad is it going to be? >> well, we have gotten better. they expect capital growth down 1.2%. that's an improvement. a couple weeks ago it was down .5%. >> materials down 20%, energy down 16%. >> correct. again this quarter the sectors that rely on commodities prices are seeing the biggest hit. materials as you said down 20%. certainly be interesting this afternoon to see where alcoa falls. currently they are expected to be down 99% from the year ago quarter. of course, within materials we are seeing metals and mining looking to be down 40%. >> what does this mean for me sitting at home? if you know it, the analysts
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forecast it, that must be in the market and yet the s&p has rallied over the last few months. when i see a materials report results down 20%, will the stock not fall? >> you're right, there's a disparity wean the markets and what analysts are seeing. we are seeing earnings at a three-year low. this negative 1.2% is the lowest we have seen since third quarter 2009. i think investors have been focusing the last few weeks on the comments of the fed, the ecb, they have not really turned their droex earnings at this point. once we see companies missing estimates and revenue targets, that will certainly start to filter in to the way markets trade. >> are you predicting that individual stocks will fall when they disappoint or that the market will fall? not that they disappoint, let me rephrase it, when they come through with profits lower, do you believe the stocks will fall or that the market will fall? >> i think it will have no
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impact on the overall market depending on how many companies report misses, if they do, but also what the guidance is for the fourth quarter and even in 2013 not painting such a py picture at this point. so i think it really does depend also on what the guidance is going forward. >> inevitably, good to talk to you. christine schult, senior manager at s&p capital. melissa, you have the 5:00 show and know earnings season starts tonight and you'll talk about alcoa. >> we will also be on the conference calls. thank you for that, simon. we have another market flash here, this time within the cloud space. let's go to mary thompson at hq. >> we are talking about vmware. we do have it breaking below the ten-day average to help accelerate the gains or the
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losses to the downside, but again the stock up more than 5%. carl, back to you. >> thank you very much. mary thompson there. a tale of two cities, how playing the game of risk has landed the banks in new territory. and later on, cashing in curb side. the best take-out targets before the restaurant sector reports earnings in earnest. mistic productivity up, costs down, time to market reduced... those are good things. upstairs, they will see fantasy. not fantasy... logistics. ups came in, analyzed our supply chain, inventory systems... ups? ups. not fantasy? who would have thought? i did. we did, bob. we did. got it. hey, it's sandra -- from accounting. peter. i can see that you're busy... but you were gonna help us crunch the numbers
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four years after the financial crisis overrun by regulation, is wall street still rolling the dice when it comes to risk taking? we are reporting on the game of risk at america's biggest banks all day, and this time around how citigroup attended a turn-around after $60 billion in unforeseen mortgage losses severely damaged the bank. kate, i understand you spoke with citi's cro, brian leach. >> that's right. what he's done is interesting, if any bank had become a poster child during the crisis, it was is your honorly citi.
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they lost $60 billion due to ill-conceived mortgage investments. this put the bank out of business prompting multiple tax bailouts, which i'm sure you remember. he overall liquidation of capital investments. he's replaced 11 of 13 people who reported to him when he first took the job. he's also added a hong kong base, which they haven't had before. he made it so the bank can engage risk exposure around the world by product, so for example it can add up the global real estate holdings to the mortgage-backed securities so they get one big picture. he's overall the bank's technology before the crisis that was so pokey that the cfo couldn't look at certain trading positions on a saturday. and leach is also obsessed with rigorous stress testing. his view, avoid the ridiculous without overlooking the obvious. >> so if every time you came up with a risk management scenario
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like an asteroid was going to hit the earth and that was your scenario, it is not credible. you can't manage to that. what happens if investment creates spreads that move by 50%? that sounds like a lot, a large number, and yet if you go back during the previous ten years or so, it's happened up four times. >> leach's work has helped boost profitability according to glenn shore, and shares of citigroup are up three-fold since the 2009 lows. citi has more cash since the pre-crisis and the borrowing dropping 81%. a trend at all the major banks whose ratio of tangible rates to equity has been cut in half, guys. leverage is way down across the industry, but it's at citigroup, in particular. >> interesting numbers. don't go anywhere, from citigroup to the broader banks, big earnings out of jp morgan and wall street this friday, how have they done in the past quart her?
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joining us, bethany maclaine, and kate kelly is sticking with us. betha bethany, good morning to you. how much credit do you give leach given that he has done a lot to clean things up, but the results on the share price have not been as noticeable? >> well, we do give them credit for cleaning things up. they had a big job to do, but now we need to see if they can get citi moving. we have not seen that yet in citi's stock price or revenues. they have a phenomenal franchise. so if anybody can get moving you think it would be citi, but we need to see these guys execute. >> one of your sources calls them the ultimate beta ceo. explain that. >> it's a phrase i have heard recently which is a beta ceo, someone who does what the market does, deliver what the market offers but no more than that. people are out there looking for the ceos who show real thought leadership in this city. and i think you can find it lacking in the banking industry. >> so bethany, if you can compare that rating or that
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assessment of pan did to other ceos on the street. >> you have each with different predicaments. bank of america citigroups and they have done a good job at least what i hear from investors. what can he do once he cleaned it up? how do you get it growing? jamie dimon, bruised from the big losses in london over the summer and last spring, bruised but most certainly not broken and big changes at goldman sachs which it will be interesting to see. lloyd blankfein steered the company through the financial crisis and has not done a great job managing the reputation and i think this turnover as chief financial officer is a very big deal. >> i think blankfein has given another interview to politico. i have to look a little farther, but is the feeling with vin ear out is that the likelihood lloyd
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stays has gone up. >> internally i am hearing they think lloyd may be near the end of the tenure but i may have another year or to in him. i would not be shocked but at the same time he may hang around another year or two. i think what's interesting about schwartz, he is very much a trader, a sales trader, got the background, in the commodities division, i believe, a close friend of gary kone so he is the quick moving quick thinking folks as opposed to the investment bankers and the john bain types and the henry paulson's either, not a slow paced person, but at the same time he comes from the banking side that was historically fer till ground. >> and, bethany, you have written extensively how that baton got passed a long time ago from the old school to the new. >> it has been a big change at goldman sachs and it will be interesting to see how they handle this transition.
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vinear fulfilled a lot of roles, not only the cfo but he was also the chief risk manage and a classic culture carrier, someone who does really well at transmitting goldman's culture. harvey schwartz comes from the outside and no knock against him but he is stepping into big shoes. >> we have a couple different stories regarding comp today, one the mckenzie study that says it will be years before banks have a sustainable profit molds and on the other hand a pool of blankers that believe the bonuses will be larger next year rather than smaller. are there some on the street that simply don't get where the business is headed. >> i think comp in general is very compromised from four or five years ago. the bankers expecting big bonuses, maybe they worked on mega deals but really i think they're the exceptions, not the rules, and i think one thing that's happened is banks are giving people compensation much more in stock and restricted
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stock or options and these are things that incentivise them to stay with the bank for a number of years which is all really good when it comes to accountability and paper performance. at the same time with stock prices depressed in many places, comp is overall lower, the cash component is lower, so you have a lot of unhappy people in the trading and banking community. >> bethany, a final point, the vesting period keeps getting longer and longer. i think deutsche is five years and probably likely other banks will follow. >> it is fascinating, right. you can give it to people but you can't take away. a friend of mine that worked on wall street said as recently as the mid-1990s a million dollars was a lot to learn and this decade plus we just saw this surge in compensation such that a million dollars came to be chump change, and now this return to something approaching normalcy, still big numbers but some in stock and getting protests, and to the average person it is just kind of shocking. >> right. doesn't stop young grad students from complaining that they miss
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the boom by just a couple of years. kate, bethany, thanks so much. >> thank you. >> see you later. >> we want to point out shares of apple just off the session lows of right now down by about 2% at this hour. we should note that apple is in fact in correction territory. it is off 10% from the record close of 702 on september 19th, so apple shares now down about 2% again in correction territory should it close at this level. >> 700 was the clear line in the sand. ahead on the program rick santelli will join us with the santelli exchange from chicago. rick, good morning. >> good morning, simon. i am going to have something that will be very fascinating for you, the fact that you're a brit, but we'll start out with a post mortem on friday's big drop in the unemployment rate and what independent research has to say about it and all talk about california in a two-fer during the santelli exchange at the top of the hour and we'll talk about
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a very spicy winston churchill quote and how it relates to california's gas issues and from california, bottom of the hour, tom gray from manhattan institute, happy feet, and we're not talking penguins here. with , a crash management system and the world's only tridion safety cell which can withstand over three and a half tons. small in size. big on safety.
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welcome back to squawk on the street. taking a look at shares of owens corning, cutting the full year forecast and expecting earnings before interest and taxes between 280 to $30 million, below earlier estimates of 360 to $420 million and the reasons weaker demand for roofing and composite materials. down 9%. "squawk on the street" back with more after this break.
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welcome to hour three on "squawk on the street." here is what's happening so far. dodd-frank is a nightmare. it is already impeding economic growth in america. these numbers don't square with what's going on in the economy. say what you want. >> i think they should default. i think they should devalue and give themselves an opportunity to trade their way back to prosperity and they would also get back the democracy, ability to govern themselves and perhaps some sense of hope. >> the world bank is saying the
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obvious. if you continue to call for austerity, you can't get growth. it is like do you want growth or do you want austerity. this is a true battleground. it has that feeling of coming over the top, 60,000 people die in the first three hours and i don't want to touch this thing. it is too hot. it is sizzling. research in motion, jeffries, says it might be delayed here. >> becky quick got this out of the ceo and now it is common? please. just watch squawk. >> i wouldn't bet my house on the fact that greece is leaving the eurozone, but i certainly think as this continues at some point the greeks will look around and say is this working and so far the answer is unquestionably no. good morning, and buckle up. we're live here at new york stock exchange and a check on the markets when the dow tumbled
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86 points really just in the past few moments. owens corning with a warning that led some to selling housing related names and tech is the story. apple three-straight days before the 50-day moving average and the nasdaq 100 followed suit and now down 10% from the high of 705, apple is officially in correction territory. energy stocks the biggest gainers and phillips, newfield and console higher and exxon in the green trading around a four year high and research in motion falling sharply following comments from analysts at jeffries saying they're up against the end of the q1 launch window and they think the handsets are unlikely to launch before march. apple in correction territory. is it finally time for investors to be worried or is this the ultimate buying opportunity? the roller coaster ride continues for netflix after a 30% rally in the last two weeks, taking a stumble in the red.
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is this stock too volatile? german chancellor met in grease by terns of thousands of protesters. we'll go live to athens and get the latest on the situation there and restaurant stocks facing big obstacle from a drought to high gas prices. will earnings season deliver better news? all of that and more on the menu in the next hour. first to apple as we said, the stock is now in correction territory. on the phone a senior technology analyst with stern agee. at last check, shaw, buy rating with 840 price target. is this the end of a short-term era? >> i think in the near term there is definitely consolidation in the name and it has been a stock vertical and you are seeing some profit taking here, and also the negative headlines out there including with fox conand minor complaints about scratches and
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the camera, that's also causing some concern in the company. >> yeah. interday high 705 back on september 21st. that is the day the iphone 5 was launched. we all know that the stock tends to fade a little bit following a product launch. i don't think anyone suspected anything like this. >> well, you know, i think the broader concerns with the economy also not helping, and arguably this stock you recall was around $500, dropped as low as that around just concerns with iphone 5, the timing, et cetera. we think the concerns right now is probably tied to ipad mini. it is interesting that i think investors are waiting for apple to send out the invite. they haven't send that. we believe when they do send out the invite the stock will rally. >> when do you see that happening? >> well, what we're hearing is
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that the components are being sourced right now out in asia, so we expect an announcement perhaps next week, and it is interesting that they're reporting earnings on october 25th, right, later than usual, so we believe they're setting aside time for a potential special announcement. >> interesting. and that would be a launch with what kind of time frame, if in fact this does come to pass? >> so what we're hearing is that the production is actually already occurring. we expect that the launch of the product should be within a few weeks. we don't expect a big delay in terms of potential ipad mini launch. >> shaw, interesting debate here. you mentioned worries about the camera scratching and supply, short-term supply disruptions and there is also people that believe it is simply a market leader and going into an election and going into an uncertain earnings season,
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people, this is their winner, and this is what they're going to sell first. it is more of a macro trade. don't you think that has more to do with today's weakness? >> yeah. that is probably it. it seems to be more driven by that than company-specific fundamentals, but with a 10% correction we think it is right to get back in. >> interestingly, the market cap still has a pig lead on exxon. they would have to fall below 456 to give up their title as the most valuable company ever. always good to talk to you. thank you for coming to the phone. >> thanks for having us on. >> shaw wu talking about apple amid broad weakness today. mary thompson has a market flash looking at the etfs. >> it is not a pretty picture. looking at the etz and ztf representing the nasdaq 100. right now down 1.5%, breaking below the 50-day moving average and the cause is apple and the
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four day decline pushing it lower. this is the largest individual holding within that portfolio and makes up about 19% of it. the sell off in apple having an impact there. >> hop over to the cme, rick santelli with the santelli exchange watching supply and other things this week. good morning, rick. >> good morning, carl. conviction, conviction is an interesting word. if you really believe in something, your conviction shouldn't be distorted by variables such as convenience or price or money. okay? now, to that end i think what happened in california is very apropos. you have a state this is always in the environmental camp and once the environmentalists had to pay a big jump in gas prices or inconvenienced at long lines or stations out of gas, boy did that blend hit the road t reminded me of one of my favorite very spicy winston churchill quotes, let's put the
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quote on the streen and i will read it. churchill, a big party with a bunch of socialites, ma'am, would you sleep we many for 5 million pounds. >> goodness. >> i suppose we would have to discuss the terms of course. would you sleep with me for 5 pounds. >> mr. churchill, what kind of woman do you think i am? >> ma'am, we already established that and now we're haggling about the price. i am sorry, but that fits to a t. another big issue was the job's report. many of course were talking about my prediction last month and before the number about the rate being under 8%. connect the dots. why did it happen? here is some of the other dot connectors. this is from deutsche bank. it is note worthy that nearly 70% of the rise in household employment was in part-time workers and that the 20-24 year age group posted its second largest monthly gain in the last 64 years. s on sensibly, these two
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anecdotes hint of possible election year distortion in the data. that's the way they connect the dots. of course in about 10 or 15 minutes we'll stay on this california theme. whether it is the greens, energy, jobs, taxes or debt, there are a lot of happy feet leaving california. we're not talking penguins. we will be talking to a gentleman from the manhattan institute, mr. gray. carl, back to you. >> look forward to that. thanks so much, rick santelli in chicago. over to athens now. the german chancellor making her first visit to greece since the debt crisis erupted sparking eated protests by the two largest unions. carolyn roth is there live with the latest on that. good morning, carolyn. >> hey, karl. good morning. the parliament square has calmed down considerably. remember, about an hour ago we showed you scenes of violent outbreaks here and now the protesters have been replaced by
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cleaning crew. yes, they're already cleaning up. the protests today all in all were largely peaceful, some 40,000 people took to the street to protest against merkel's first visit in this country in five years, the first time since the debt crisis erupted here three years ago, and, yes, there were violent outbreaks, but they were limited to fairly small groups. yes, the police did fire teargas against the protesters and stun grenades, but there are no reports of any injuries. we know that 50 people have been detained. what we saw happening in central athens today is nothing that we haven't seen before. in terms of what went on on the political side, of course it was a highly symbolic visit by merkel as we discussed before, and in terms of what they told us in the press conference after the talks wrapped up, nothing really new as we would have expected. angela merkel reiterated she wants greece to stay in the euro zone and of course in return
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greece will have to continue with reform efforts, and then the prime minister says of course we're going to stick to our commitments, but a lot of challenges remain for greece, specifically in the next few weeks because greece still needs to get 31 billion euro trade of eight and last week the prime minister reminded us the kurch try is running out of cash in november and before they can get the aid they need a positive burdening on the spending cuts. >> thank you so much for that carolyn roth from athens. what do cabbage patch dolls, indoor grilling and netflix have in common? herb greenberg will join us next to talk about that. escape from l.a. where more people are making like kurt russell and getting out of town. another metaphor filled hour is still ahead. s...
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a sector check, energy and utilities the top performing sectors. it is a day to play defense more than offense. discretionary and technology lagging the broader markets. technology essentially getting hammered, down 1.5%. netflix under serious pressure after seeing big gains earlier in the week. stocks a down grade this morning and this comes after an upgrade
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yesterday. herb greenberg is here with more on that. what is going on with the flix? >> that's right. you have the under perform today and yesterday was the analyst with the out performer overweight and what's beautiful about this, and it is something brian sullivan and i will be talking about later on street signs. the analysts disagree about whether amazon is or is not competition. what really matters here is this. that is whether netflix growth is either slowing or about to really slow. as a right today on cnbc.com at the current subscription levels they could be close to triggering what i like to call the chainos rule, who for years pointed one thing out to me. when a growth company sells 25 to 30 million products, it is pretty much all in with its growth, products, units being out there and same with subscription services. this is what happened. cabbage patch dolls, the george
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foreman grill, the keurig, and hbo. it is interesting. hbo peaked around 30 million subs which about where netflix is today when you add in dvds and streaming. streaming alone, carl, is around 23 million which again gets you close to that rule either way. >> and are apple -- i mean hbo and netflix, apples to apples or not? >> you know, hbo when it was all in the bottom of a $70 cable bill so people were going to be reluctant. he says it is a little different when you have an $8 product. the difference he says is will netflix original streaming actually matter? will that create the rebranding and kaz additional growth? if not, even he says as a variety of people have said today, we have seen a number of reports coming out, the growth is slowing and you have the penetration in there so we'll
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see. >> no wonder they're talking more international. the chainos rule is fascinating putting a number when you're in the market. >> it generally always works. >> interesting. good stuff. thanks so much. the saying is go west, young man, but it seems that more people these days actually going east. we're going to find out why the golden state might be looking a little tarnished and then later the visit to greece that prompted the capital's biggest security operation since '99. back after a break.
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dow is about 6 points shy of a triple digit loss here. talk markets with rick santelli. good morning. >> good morning. i apologize.
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we had somebody from the manhattan institute with logistical problems and he will be back tomorrow. we always have our man dan. let's pick up on what the threat is. usually things in the news cycle say 24 hours. the drop in the unemployment rate is friday. it is still a hot topic as ever. we don't need to go into the whys. let's go into the whats. the substance of the economy or the labor market, all the same, versus how people really feel about it and what -- everybody walking on the street, everybody on the floor has a certain feeling. what are your thoughts? >> we all know it was a better number. it wasn't a good number. after we have had a weekend to digest everything and people are seeing what it was, a lot of part-time workers, a lot of youth part-time workers, 24-year-olds, it is not enough. that isn't what's going to get this economy rolling. we need those numbers to improve. it hasn't happened yet. >> it is political season and everybody gets silly and they call it the silly season. i think when people go to vote, it is going to be the feel of
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how the economy impacts their lives and how the job market impacts their lives. thoughts. >> absolutely. despite the s&p being where they're at, i don't feel good and most people i talk to don't feel good. everybody that says something is wrong here. we have qe3, soon to be qe with exponential numbers and that won't do it either. we need real substance. it is not there, and i don't feel good about it right now. >> had it comes to europe and merkel and the protests in greece, it makes me a little nervous because no matter what you feel about the germans right now, it seems as though they're trying to do the right thing. this is a problem that is not only hard to wrap your arms around it, it is changing every minute. there is deterioration in economies and that makes it harder to steadfast to the reforms. >> right. everything they're doing is just seems to be making it worse and worse. you're right. they are trying to do the right thing. the right thing right now, we don't know if it is working properly. there are so many different
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aspects out there, different peoples, that aren't agreeing with this thing. we knew this was going to happen. you can talk about how great things are going. the reality is the dutch are pushing back, the germans are bushing back, finland, everybody, because what is this going to cost me? it is not the same as the united states where we coalesce together. you have different nationalities and different customs under one union but it is different. >> everyone is familiar with faraj, a guest this morning on "squawk box" and he is very much half empty any of this will happen and it will take many years for the world to see it can't happen the way they want it to happen today. you have watched those. what do you think? >> it isn't going to happen today. it is going to take a long time. that's the question. we're not going to see it in the next couple years. if we can compartment allies and keep europe away from ineffecting us, and that's a big
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question, that will be enough but we have a lot to do here. we have elections in november. we have to have the two political parties get together. let's solve what's going on here and then we can worry about the other problems and how they impact us. >> do you think the next employment number is going to show current trends? do you want to make any predictions? >> i am betting the next employment numbers won't be near as good as this one is. fortunately, unfortunately for either candidate, doesn't make much different. >> remember the good old days when we can talk about the strange anomolies without being blasted because of the political implications? >> i think the political implications are being made too much, making too much of it. i don't know that there was a fix. i doubt there was a fix. it doesn't make a difference. >> cynical and traders, are they married together? >> too much. >> nicely done, guys. take a look at markets before we go to break as we said the dow is down almost triple digits, about 10 points away. obviously the pain is being felt at the nasdaq down almost 1.5%
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and the nasdaq 100 breaking the 50-day moving average and all of this is happening on heavier volume than yesterday, the second lightest volume day of the year at least here at the nyse. a few moments before europe's trading day and we'll get the close with simon and details on how it might affect us this afternoon and we'll recap merkel's appearance in athens when we come back. ♪ [ male announcer ] how do you make 70,000 trades a second... ♪ reach one customer at a time? ♪ or help doctors turn billions of bytes of shared information... ♪ into a fifth anniversary of remission?
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>> another day of drama in athens as andrea merkel made her appearance, the first since the debt crisis began. thousands of police around the city. simon hobbs, that did not stop the protesters at all. >> absolutely. i will show you three symbolic acts as the most dominant figure in the european crisis went to the economy that the critics argue she is destroying through austerity. this is probably what will be on the front paging tomorrow morning. on the square next to parliament four people dressed in military uniforms riding and waving black and white and red swastika flags and stuck their hands out in a nazi salute. a lot of banners reading merkel out, this is not a european union, this is slavery. this is an image with huge potency around europe. the second is angela merkel at the news conference stood next to the greek prime minister. symbolic for two reasons. on the one hand she is saying i
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am a good european and i won't force you out of the eurozone. we have given you lots of money and on the second, particularly important, at home she is saying there will be no more money for you. this isn't a transfer union. there you see where we closed out on the markets, in negative territory, particularly on the market that is have done well recently. you see spain is down almost 2% and falling into the close and just before i carry on and show you the movement there, let me show you the third very symbolic thing that came out of europe today. i did say that there were three and it comes from the meeting of finance ministers in luxembourg today. listen to this. in 2014 every time you trade a stock or bond or derivative in europe, you will pay a tax. yes, 11 of the 17 member states of the eurozone today have got
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together to say they will have the tax. it is symbolic because it may raise 50 or 60 billion and it is the european politicians way of saying to the financial services industry you got us into this mess, and we're going to tax you moving forward. i am just saying. just quick moves on the stock market before i sign off. spanish banks negative territory. i showed you the 1.9% on the market overall. they were the notable movements. on the upside, and this comes from china, you see a lot of mining stocks or the steel stocks doing reasonably well although those gains were lost heading into the close. slightly banned in china and the talk that you may get easing as well and one more, let me just remind you tomorrow and this is a huge deal, the eads, tomorrow on the u.k. takeover rules is the deadline for the deal to go through and whether they extend that we don't know and what we're looking for is the nature
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owe meeting and see if they did a deal to keep it alive. opposition is growing. >> you think antitrust is difficult in this country. >> that's national interests even more. that's like we want to control it. >> thanks so much, simon. crazy day. more details on german chancellor merkel's visit to greece and michelle cabrera monitoring the visit has details on what has been amazing to watch, michelle, even though we increasingly get used to pictures like this. >> we have seen it so many times before. i think simon was right to highlight the scene of those individuals dressed in nazi uniforms which i think a lot of people found emotionally disturbing and just shows you how high the tension is. he did a great job of running down what's happened there today. let me add more color. he is right. angela merkel is there to say we support you but you're not getting any more money. the thing is if they support greece, they will give greece more money. greece needs more money. understand that right now greece is asking for a third bailout. greece says we need more time to hit our deficit targets.
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well, time is money. they have to borrow every single day. if they can't pay the bills, the money has to come from somewhere. so if it is going to be two years more before they balance the budget, somebody has to fill the hole. it doesn't mean the germans or the rest of europe will write the check. what a lot of individuals believe will happen is there will be a back door bailout via the ecb. remember, greece still owes the ecb 25 billion euros roughly over the next three years that really like the ecb to delay receiving payment. that's not going to happen. at least it is highly unlikely. what's likely to happen, carl, is greece to going to go to the short-term markets. they're going to issue t bills or short-term notes and their banks will buy them and bring them to the greek central bank and the greek central bank will bring them to the ecb and they will be paid back with the very money they're giving back to the greeks. it will be a big circle covering 25 billion euro hole over the next three years.
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did germany write that check? no. they're going to bear a bigger burden nonetheless. it is just a lot easier to sell back home when it comes to angela merkel's political future. back to you. >> that says nothing about how the economy will grow or shrink less. >> not relevant at this point. >> not until the debt is paid back or forgiven. >> not relevant at this point. germany is committed to keeping them in. they'll do everything they can. they will do whatever to make sure they stay. >> thank you very much, michelle. second best thing to actually having you in santagma square, and bob is here looking at a market that wants to fall at least in tech today. >> for once we're not being smacked around by europe. yes, the euro is weaker and the dollar is up and i have no doubt that's a little factor, but more importantly it is what's going on in the tech world. remember, we were telling you earlier transports have been out performing and industrials for the last several days and that's not working as much today what
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we are seeing is the under performance of tech. in the last four days the s&p tech sector down about 3% and the s&p 500 only down half of 1%. it is true apple has a heavier weight, about 4% of the s&p 500, apple by itself right now, so here is apple. we are in correction territory technically in apple. so we were at 700 or so and here you see 627. that is an 11% correction for apple. i think more importantly is, and i am not trying to downplay apple, a lot of the other tech stocks have had a very tough time of it in the last month or two, particularly anything that's involved in the pc sector. take a look at what else has been going on here. i am not trying to downplay what's going on. since the middle of august hewlett-packard is down 26% and
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dell down and intel down as well and other stocks having a tough time impacting the tech sector in the last several days. as a contrast i want to show u you, google that am ko peets with apple with the android operating system is up almost 12% sitting near new highs for google. a lot of different things going on in the tech sector besides what's happening with apple. i want to mention housing. housing getting hit today largely because of what's happening with owens corning. they lowered guidance for the year and a lot of people think it is nothing but a housing stock. the insulation is used in new housing, but the roofing business is a little different. yes, you put owen corning products on new roofs and new homes, but their big business is replacement roofs, existing homes where they get replacement roofs. that was a huge business in 2011 because there was massive storms around the country and they made a heck of a lot of money on that business. there is not as many storms in
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2012. the business is down a little bit. they raised prices. there is a little bit of resistance to that and remember one third of the business is overseas. europe has a tough time of it. what i am saying is housing is still doing well and owens corning business, the insulation business for housing is doing well. the roofing business slightly different, having a tougher time as well as some of the other products. take a look quickly at how home builders are doing today, all down in sympathy over concerns about this. i do want to point out, put up the itb. here is the etf for housing, just off new highs. while there may be concern about this, obviously investors are not fleeing homebuilding stocks. >> also the issue that this weakness, they say, came as a result of an attempted price increase, right? >> that's right, pushback on that. my point here is that housing components of owens corning business, the new home component, is still doing very well. that's fiberglass insulation
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business, that replacement roofing, getting push back on. >> cue the pink panther music. let's get more insight on the global economic situation, the chief economist with ihs joins us this morning from new york. merriman, always good to have you welcome. >> thank you very much. >> reading through your notes t looks like your general view is we have extreme uncertainty in the short-term over things like the election and the fiscal cliff and after that it sounds like you think the economy is spring loaded here. >> certainly there are a lot of dynamic forces in the economy that should be giving us more growth right now. we're being held back by this extreme uncertainty and the u.s. fiscal cliff and the situation in europe you were talking about earlier and certainly the possibility of some geopolitical event in the middle east and then also a little bit about china and the paralysis of chinese politicians in terms of dealing with their slowdown also creating uncertainty.
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all of this stuff is holding back growth. >> you're saying this as we're looking at pictures of athens today which is also a mess and the good news is the underlying dynamics of recovery are in place in many parts of the world. you're talking about vehicle sales, household deleveraging, the energy boom, how sure are you these things start to boss only and even if we do get through these issues in the next few months? >> in a sense they're already blossoming and the housing is off bottom and creating hundreds of thousands of jobs in the energy sector upstream and downstream. this stuff is happening. it is the other stuff getting in the way of it, sort of becoming a multiplier if you will and starting sort of a self-sustained growth. >> so when you look at a number like a chicago pmi or a durable and you have people say these numbers are almost recessionary, i mean, it doesn't sound like you're leaning into that camp at all. is that fair? >> that is correct. i would say there is a about a 1 in 5 chance of a recession in
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the u.s. it is true a lot of businesses are a little worried that pessimistic if you will, holding back spending and hiring, but it is not killing the economy. we're not really in negative territory, we're just like stuck in low gear i guess is the way to say it. >> finally on europe you say ands this poetic given that the picture that is we see today in greece. you say crisis resolution is more on track, the expected greek exit over time, the spain's bailout, will result in a lower euro which of course ostensibly makes them more competitive. are you less confident in that call than you are on the u.s.? >> well, always. the sense of the uncertainty in europe is bigger, but i think our view right now is given what the ecb has promised to do, chances of a financial armageddon if you want to call it that in europe are lower now than they were a couple of months ago. >> well, we'll leave it on that relatively bullish note given the dow is having a rough day. good to see you as always from
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massachusetts. let's get to mary thompson for another market flash. >> hey, there, carl. taking a look at shares of eli lilly up for the second straight day, up 3.3%, the company found that combined studies of two late stage trials showed an experimental alzheimer's drug succeeded in slowing the progression of the disease modestly in patients that have a mild form of alzheimer's. investors are liking the news again. eli lilly breaking about $50 for the first time in four years yesterday and extending those gains today. >> goldman taking it off the sell list, basically falling on their sword today as well. the nasdaq falling as much as 1.5% largely on the heels of apple's losses. we'll talk more about the tech pullback and whether or not we're getting into areas where you may nibble at apple in just a moment.
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berta is over there with the latest. >> good morning, carl. we have seen the nasdaq composite, the nasdaq big caps are certainly a big reason why that underscored by apple, but we're also seeing weakness in the small caps if you take a look in terms of the russell 2,000 weeker than the overall market and chips overall are a very big weak point. it is the apple breakdown that is a huge drag. take a look at the stock. the area that athe love technicians are looking at is apple at 621.623, the two-month low on the stock, and today it got very close to that. we bottomed out so far this morning at 623.50. a number of technicians say if that holds that is a very clear buying signal. we'll see if it is able to hold that level. the next leg down would be the lows we saw in july, the last time apple had moved below its 50-day moving average, and that is in the realm, the high 570
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mark. a lot of folks watching technicals with apple's correction and recall back at the end of the july when they were back down to the high 570 range, the stock then zoomed up more than 20% to top out at 705 in september. we have earnings season and results on the iphone sales coming up. chip stocks under pressure. bernstein cutting intel from a market perform to under perform and saying that basically the pc slump will hit a lot of chip makers and today you're seeing a lot of profit taking in those names. >> 52 week low there for imtc. market of course sitting close to the loesz of the morning as the down draft appears to have stabilized more a moment. people are saying, oh, lower on heavier volume and yesterday than of course we know that volume was light because of the
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holiday to a large degree. how concerned are you at these levels? >> this is certainly a risk off move. the market has stalled here where we thought it might although it is threatening to go through that now. i don't think it is that alarmingly bearish as some people might think. apple artificially carried the markets a few weeks back and now taking off that portion of the risk, we're seeing the rest of the market down also. i think earnings season and what happens with spain in the next few weeks is more important than what's happening today. this is a small, maybe a mid-sized risk off move. >> so many people said oh, if i can only get 10% off on apple i would make a bid and they've got it. this will be a test of that, of the an ko vikz that far trade right now, don't you see? >> it is funny how you see them get out of the way when something like this happens. they disappear. >> between earnings and europe, what is the bigger driver of concern? what makes people more worried? >> the bigger fish is europe.
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earnings are certainly a big fish. we're expecting a reduction of 2.5% in aggregate for the s&p 500 in this quarter. that expected, if we get something in that range, maybe earnings will keep stocks about where they are, priced 14 times earnings. if stocks don't come in too far that could force the ratio to almost 15 on its own. i think what happens there if you get the funding from the esm and the ecb that we're hoping for, i think that will make things seem a whole lot better. it won't fix europe obviously. it won't fix spain. it will certainly kick the can down the road and enable people to breathe a little bit. people were saying a whole group of investors haven't participated and want to catch up and relative performance will be the catch phrase of the fourth quarter. i wonder if you think that will remain in tact as we see that scenario put in motion?
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>> i think it is true to some degree but these are going to be volatile times. how do you jump in? you're going to be careful even now. you're not going to jump in just because you missed a move because now you run the risk of buying at a high price when there isn't much room for the upside so i think there is still cautious money out there even at year's end. >> is is the safe trade right now going to a defensive play if you haven't been there already? do you rotate into yield, dividend providing names or too early to make that call? >> if you look at the stocks today and the utilities and the reits are the stronger performers although nobody is really strong. being a cautious guy, you're right. >> good stuff. things will change in the next few hours i am sure. thank you for coming by. from spiking grain prices to a bacon shortage, a tough road to hoe for restaurants. we'll see if earnings seasons
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brings up better numbers when yum starts reporting. 't mr. marg. mr. margin? don't be modest, bob. you found a better way to pack a bowling ball. that was ups. and who called ups? you did, bob. i just asked a question. it takes a long time to pack a bowling ball. the last guy pitched more ball packers. but you... you consulted ups. you found a better way. that's logistics. that's margin. find out what else ups knows. i'll do that. you're on a roll. that's funny. i wasn't being funny, bob. i know.
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the june quarter was tough for restaurants. as earnings season kicks off could they hope for better numbers? jane is live in burbank with more and we'll get numbers tonight, jane. >> yes, we are. breakfast, i will explain what this is in a minute. the street thinks yum is yummy, they're expecting 17% earnings
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growth after the bell. taco bell is seen as a good indicator to consumer but the company has also seen with the kfc, a good indicator what's happening in china. chinese consumers have been flocking to the colonel's chicken and that stopped last quarter when they reported an operating loss there. this for a segment that provides 40% of profits and predicted return to double-digit earnings growth there the second half of the year. commodity costs could be an issue for everyone in the industry especially with beef next year and r.j. says companies managed the costs so far. >> they were pretty good about keeping prices relatively contained, so i think there is some pricing up from the system and we probably would start to see that next year and if they're able to pass that along and the end game won't see a huge operating margin ahead for the companies. >> he thinks yum is one of the most compelling growth stories and oppenheim era degrees and taco bell is trying to go high
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end with the prototype fancy stores and could it make a run at chipotle? is it a big like comparing to bud? taco bell has its fans. >> i like taco bell. i grew up on it. i like the price. >> it is very fast. very cheap. very close to school. >> if you want a healthy option, duke that or do it cheap, you can do it that way as well. >> some people don't want to walk in line and design a burrito. they just want to order the three crunchy tacos and a giant pepsi and go home. >> there you go. taco bell is based in california and piper jaffray is restaurants with a lot of exposure here could benefit and poise for strong sales growth over the next several quarters as the state benefit from employment growth ahead of the national average and a rebound in-housing and that report came out before gasoline prices hit a record and
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even though the wholesale pot price is falling for gasoline, a new record retail price, slightly over 4.67 and for that you can get four egg and bacon burritos and still have change left over. that creates its own kind of gas. >> jane, i know you will finish all of those before your next hit. that is all good stuff. there you go. jane wells joining us with a look at the restaurants. we'll take a closer look at the tech sell off after the break. ally bank.
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welcome back to "squawk on the street." taking a look at shares of intel, the dow component leading in the tech sector just off about 2.7% and also touched a 52 week low earlier. the reason being bernstein cutting its price target and lowering it to an under perform. they're very concerned that slowing decline for pcs is going to cut into the average selling price of intel's chips. therefore hurt its profit margin, so stock is getting hurt as a result of that call, off 2.6%. back to you. >> i think it is important to look at intel but also hewlett-packard and microsoft, basically anything involved with pcs, and this trade has been
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going on for teams like forever, still the biggest are drag on the dow today. >> yeah. funny they're talking about it now because it is a story we're talking quite some time and getting a lot of notice today. >> thank you very much for that and dragging down the dow other stock that is suffered from various down grades, take a look at j & j, goldman sachs cutting from sell to neutral, the stock pricing in all the potential for growth and lacks the transformational pipeline opportunities that you would want to see in a big pharma name and kramer would disagree and already has and for the time being it is down 1.8%. disney got a down grade earlier in the week from a firm saying it basically was beginning to trade in line with historical growth trends and kramer's charitable trust said they began selling that name last week as well. radioshack, b of a upping it from an under perform. they didn't start in the middle with a neutral. all the way to a buy saying that